Interview with Lasse Sundahl, Project Manager at DONG Energy

This time, we had the chance to interview Lasse Sundahl, Project Manager, Group Regulatory Affairs, DONG Energy. His take on the developments of the OWE market provides interesting insights from the perspective of a champion of the OWE industry.

Baltic InteGrid project:By 2020, DONG Energy aims to have doubled their installed capacity compared with 2016 from 3.0 GW to 6.5 GW. What are the main driving forces and barriers in order to reach this goal?

Lasse Sundahl:DONG Energy has made final investment decisions on projects fulfilling our 2020-target. An important enabler has been the EU 2020 target and the resulting ambitious Member State targets allowing for sufficient pipeline to build up the supply chain and drive down costs.

Our main concern for the offshore wind power industry as such is not the projects towards 2020 but the missing projects towards 2025/30. From 2009 to 2016 approximately one offshore wind turbine per day was installed in Europe. Based on politically decided projects with a commissioning date after 2020, this number will drop to ½ turbine a day. To continue the cost reduction trend, the offshore wind power industry needs a stable and significant pipeline of projects beyond 2020. We are confident, that visibility of a continued pipeline of 1 turbine a day will provide for this. This means a target of at least 4 GW per year in Europe assuming increasing turbine size introduced post-2020.

Currently, there are 9.0 GW installed offshore wind capacity in the North Sea. DONG Energy is one of the biggest developers. However, the development of offshore wind farms in the Baltic Sea is lagging behind with only 1.5 GW installed capacity. What is your assessment, what are the main reasons for the lack of Baltic Sea OWE projects as compared to the North Sea? What is your vision for the Baltic Sea Region?

The main difference in offshore wind power development between the North Sea region and Baltic Sea region is political ambitions. In the North Sea region, we have seen the UK and Denmark as first movers commissioning large projects already 10 years ago. Germany and now the Netherlands have since followed with significant pipelines of projects. However, the relative success of the North Sea is also based on better site conditions such as stronger winds and higher demand.

In the Baltic region, we have seen a more reluctant approach towards offshore wind power from countries like Poland, Sweden, Finland and the Baltic countries. However, we are confident all countries around the Baltic Sea will benefit from exploiting the offshore wind power potential through increased energy independence, cleaner and reliable electricity production, growth and jobs.

So far we do not have a clear vision for the Baltic Sea. We will start developing one, as soon as the political will in the relevant countries in the region increases. However, we have some principles that any vision should build on: First, political ambitions for the Baltic Sea region should be high and reliable. Countries joining efforts will add to this. Second, we would suggest to expose projects, transmission assets and interconnectors to as much competition as possible. The UK approach holds important lessons for the rest of Europe. In UK, developers compete not only on the offshore wind farm, but also on the substation and connection to shore. Third, strike the right balance between top down and bottom up to harvest benefits from both high-level planning and commercial drive and innovation. Creating appropriate incentives in the regulation of commercial activities can set free a powerful drive for innovation to the benefit of the region, consumers and industry.

In your opinion, what are the biggest challenges for the development of a meshed offshore gird in the Baltic Sea?

The biggest challenge to overcome – in my mind – is preparation of the analysis showing that a meshed grid is indeed the most cost effective approach available to develop offshore wind power in the Baltic Sea region. The Baltic Sea is stretched, but not wide so you are never far from shore. One must clearly demonstrate the benefits of investing in a Baltic meshed grid compared to alternatives. An alternative could be hybrid projects (point-to-point interconnectors connected to off-shore wind farms). The main challenge for such projects is increased complexity e.g. how cable capacity and resulting cash flow in a hybrid project is distributed between interconnection and wind farm production. Lessons from Kriegers Flak will be valuable for future hybrid projects.

How could a meshed offshore grid in the Baltic Sea Region be moved forward?

To succeed, I am convinced that we need to develop policies and regulation that allow for and proper mix of top-down political decisions and planning and for bottom-up commercial drive and innovation. In my mind, it is all about getting incentives and competition right and approach challenges with an open mind. A high-level approach could follow 3 basic steps:

If there is a benefit in connecting interconnectors to offshore wind farms, part of this benefit should flow to offshore wind developers. If the benefit outweighs the cost (including risks), the offshore wind developer will by nature include interconnector projects in their projects. In essence, regulate to bring forward competition, innovation and incentives and let the market work.

What are the “lessons learnt” from the experience in the North Sea which should be considered for offshore wind projects in the Baltic Sea?“

Scale, innovation and competition brings down costs. To deliver on costs in the Baltic Sea region, the industry needs a solid offshore wind power project pipeline both in the Baltic and the North Sea. This will enable further innovation, larger turbine platforms, improved structure design and the continued build-up of the supply chain. In the North Sea, different auction approaches have been implemented. The countries in the Baltic Sea should take advantage of the lessons learned. Member states and regions will maximize their benefit of offshore wind energy if they expose as much as possible to competition. A system like the Danish or Dutch works effectively with the high degree of cooperation in the supply chain. If more competition were introduced in project development and transmission asset, auctions would provide further efficiency.

Lessons from UK show that increased competition can be introduced by tendering the offshore wind transmission asset together with the offshore wind park. This UK-style model of ‘tender and regulate’ of transmission assets could be introduced and further improved in the Baltic Sea region.

Finally, any offshore grid needs sufficient onshore grid to allow electricity to flow to consumptions centers. Hence, onshore grid planning should already now include necessary onshore grid reinforcements to allow for this flow.